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Corporate globalization and bank lending

Author

Listed:
  • Shujing Li

    (China Securities Regulatory Commission, Beijing, China)

  • Jiaping Qiu

    (DeGroote School of Business, McMaster University, Hamilton, Ontario, Canada)

  • Chi Wan

    (Department of Economics, Carleton University, Ottawa, Ontario, Canada)

Abstract

This paper investigates the effect of corporate globalization on bank loan contracts, as reflected in both price and non-price loan terms. We show that globally diversified firms receive more favorable valuation from creditors than domestic firms do. Specifically, we find strong evidence that global firms are charged lower loan rates, and are spared the more restrictive non-price contractual terms such as short maturity and collateral requirements. Our results are robust to various extensions, including controlling for firms’ endogenous choice of globalization, recognizing the joint determination of loan terms, and using alternative measures of global diversification. Our study contributes to the international business literature as the first comprehensive investigation of how global diversification affects bank lending.

Suggested Citation

  • Shujing Li & Jiaping Qiu & Chi Wan, 2011. "Corporate globalization and bank lending," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 42(8), pages 1016-1042, October.
    • Handle: RePEc:pal:jintbs:v:42:y:2011:i:8:p:1016-1042
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